ANALYSING THE SCOPE OF EMERGENCY ARBITRATION IN INDIA

This blog is authored by Manya Manchanda, 4th year, Vivekananda Institute of Professional Studies, GGSIPU.

Introduction

Arbitration is a technique in which a dispute is resolved, by the agreement of the parties, with the help of one or more arbitrators, who make a binding decision on the matter of dispute. The parties opt for a private dispute resolution process as an alternative to going to court.

In an ‘Emergency Arbitration,’ arbitration is ordinarily arranged by the parties themselves without resorting to an Arbitral Tribunal. These proceedings are conducted by an Arbitrator, according to the clause in the agreement between the parties or with the consensus of the parties. The relevance of these proceedings arises wherein a party is compelled to seek interim relief before an arbitral tribunal is constituted, for the grant of final relief. Before obtaining the interim relief, it is obligatory to prove that the claim against the other party has reasonable merit and that failure to obtain an interim relief would result in grave and irreversible loss.

Emergency Arbitration In India

In India, the Arbitration and Conciliation Act, 1996 does not recognise Emergency Arbitration. Yet, efforts have been done to inculcate the same in the Indian laws. The Law Commission in its 246th Report on amendments to the Arbitration and Conciliation Act, 1996 proposed an amendment to Section 2(d) of the Arbitration and Conciliation Act, 1996.

Thus, this amendment would have created provisions for the appointment of an Emergency Arbitrator.

According to Section 2(d)- “Arbitral tribunal means a sole arbitrator or a panel of arbitrators and, in the case of an arbitration conducted under the rules of an institution providing for the appointment of an emergency arbitrator, includes such emergency arbitrator."

Nonetheless, this amendment failed to incorporate the recommendation of the Law Commission’s 246th report and did not provide for Emergency Arbitration as suggested. Notwithstanding this fact, the arbitration institutions in their rules have cognised the term "Emergency Arbitration”. They have framed rules alongside the international arbitration institutional rules, such as the Indian Council of Arbitration (Article 33), the Nani Palkhivala Arbitration Centre [Rule 20(A)], Mumbai Centre for International Arbitration (Rule 14), Delhi International Arbitration Centre (Rule 14), Court of Arbitration of the International Chambers of Commerce-India (Article 29), International Commercial Arbitration [Section 33 r/w Section 36(3)], prescribe provisions for Emergency Arbitration. Furthermore, the UNCITRAL Model Law under Article 2(a) defines arbitration as “any arbitration whether or not administered by a permanent arbitral institution,” it indirectly includes emergency arbitration under its ambit.

Thus, according to the rules, an Arbitrator appointed for the resolution of a dispute in an Emergency Arbitration is known as an Emergency Arbitrator. The Emergency Arbitrator becomes functus officio after the interim order is passed by him.

According to Section 9 of the Arbitration and Conciliation Act, 1996, parties may apply for interim reliefs to the court at any time before the enforcement of the arbitral award so passed. Nevertheless, under Part II of this Act which deals with the enforcement of foreign arbitral awards in India, only final awards can be enforced before the courts in India. Interim awards passed in emergency arbitration proceedings are not recognized statutorily in India.

Thus, the enforceability of the award passed by an emergency arbitrator have arisen in only a number of cases and have remained unanswered.

Enforcement of An Emergency Award In India

The Bombay High Court, in the case of Avitel Post Studioz Ltd & Ors vs Hsbc Pi Holdings (Mauritius) Ltd, involved the issue of an arbitration agreement between the parties that reserved their right to seek interim reliefs before the Courts of India, while the Arbitration was conducted outside India. In this case, the parties resorted to Emergency Arbitration in Singapore, who sought to enforce the same in India. The Bombay High Court upheld the award of the Emergency Arbitrator and granted interim relief to the party. This decision of the Ld Single Judge was challenged before the Honourable Division Bench of the Bombay High Court and thereafter in the Supreme Court. The Supreme Court on August 19, 2020 gave its decision, yet the issue of the validity of Emergency Arbitration or enforceability of such an award arising out of such proceedings was not discussed.

The Delhi High Court in Raffles Design International India Pvt. Ltd. and Anr. v. Educomp Professional Education Ltd. and Ors. held that an emergency award in an arbitration seated outside India is not enforceable in India. In India, an emergency award, if recognised, will be favourable for parties, if the parties against whom the claim is made have their assets in another jurisdiction that recognises such emergency awards. Thus, the Delhi High Court held that the emergency award passed by the Arbitral Tribunal cannot be enforced under the Arbitration Act and the mode for enforcing the award would be for a party to file a suit in the Indian courts. Thus, the Court held that the award passed by the emergency arbitrator does not fall in the scope of the Arbitration and Conciliation Act,1996. Nevertheless, it held that a party may approach the court under Section 9 of the Arbitration and Act, to seek interim relief and that the court may grant such interim relief to the party without considering the order passed by the emergency arbitrator.

Analysis of Future Retail Ltd. V/S Amazon.Com Investment Holding LLC And Ors

Recently, the concept of Emergency Arbitration came to the limelight due to the conflict between Future Retail Ltd. v. Amazon.com Investment Holding LLC and Ors. In the interim order dated 21 December 2020, the Ld. Single Judge Bench of the Delhi High Court examined in detail the enforceability of the award passed by the emergency arbitrator in India.

The quick facts of the case are that in August 2020, Reliance Retail Ventures Ltd announced that it had arrived at a deal for the acquisition of the assets and business of Future Retail Limited. Amazon alleged that the transaction was violating the shareholders’ agreement entered between Amazon and Future Coupons Pvt. Ltd. and the promotors of Future Retail Ltd. Amazon invoked the arbitration clause and initiated arbitration proceedings before the Singapore International Arbitration Centre (SIAC) against this transaction. The arbitration clause in the agreement stated that any dispute that arises would be referred to arbitration, in accordance with the arbitration rules of the SIAC. Secondly, the seat and venue of arbitration would be in New Delhi. Thirdly, the choice of jurisdiction and that of venue shall not exclude any of the parties from seeking injunctive reliefs in any appropriate jurisdictions.

After invoking arbitration, Amazon made an application to the SIAC, in terms of Schedule I of the Rules of Arbitration of the Singapore International Arbitration Centre, to resort to Emergency Arbitration and obtained an injunction against Future Retail Ltd from proceeding further with the acquisition with the Reliance group.

Amazon owns a 49% stake in Future Coupons and has alleged that Future Retail Ltd has breached a contract by agreeing to sell its retail, wholesale, logistics and warehousing assets to Reliance Retail Ventures Ltd. It alleged that the contract signed with Amazon gave it the right of first refusal and barred the sale to entities such as Reliance group.

Thereafter, Amazon made representation and attempted to hold up the approval procedures that are necessary for the transaction of acquisition in India. Future Retail Ltd group filed a suit and an interim application to seek a permanent and temporary injunction against Amazon. Future group contented that –

(i) According to the SIAC Rules, the right of the parties to approach the Courts in India is taken away.

(ii) Emergency Arbitration is outside the scope of the Arbitration Act, and thus the award passed by the Emergency Arbitration is bereft of jurisdiction and a nullity.

(iii) Emergency Arbitration is not an arbitral tribunal under Section 2(1)(d) of the Arbitration Act.

(iv) Emergency Arbitrator lacks legal status under Part I of the Arbitration Act and thus coram non judice.

Answering the issue, the Delhi High Court regarding whether the provisions of Emergency Arbitration of the SIAC Rules are contrary to the public policy of India or contrary to the mandatory requirements under the Arbitration Act of India. The Court held that “Party Autonomy” is the backbone of arbitration. Therefore, since parties choose the law in SIAC Rules, the arbitration arising out of such an agreement would be governed by the procedure as prescribed under those rules, subject to the public policy of India and the mandatory provisions of the Arbitration Act. Further, according to Section 2(8) of the Arbitration Act, there is nothing in the Arbitration Act that prohibits the contracting parties from obtaining emergency relief from an emergency arbitrator. The SIAC Rules also does not take away the substantive right of the parties to approach the Courts in India for interim relief.

The Court, with regard to the third contention raised by the party, said that the development of the law cannot be thwarted merely because a certain provision recommended by the Law Commission is not enacted by the Parliament. Thus, it cannot be held that an Emergency Arbitration is outside the scope of Section 2(1)(d) of the Arbitration Act.

The Court also held that since parties by an agreement can deviate from the applicability of Section 9, it is not a mandatory requirement of the procedural law. Rejecting objections raised by Future Group entities and deciding in favour of Amazon, the court awarded costs of Rs 20 lakhs.

This interim order was appealed before an honourable division bench of the Delhi High Court, led by Chief Justice DN Patel which vacated the interim order of status quo. The appeal against that order is currently pending in the Supreme Court.

Conclusion

The concept of emergency arbitration is obliged to grow and emerge in India with the decision of the Supreme Court in the Future v. Amazon case. As reviewed above, many of the pre-existing institutions have provisions for Emergency Arbitrations, it has become inescapably important and in times of Covid-19 situation such that emergency proceedings will increase and new amendments and procedures are tending to arise.